Correlation Between Sabra Health and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Sabra Health and NorAm Drilling at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sabra Health and NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sabra Health Care and NorAm Drilling AS, you can compare the effects of market volatilities on Sabra Health and NorAm Drilling and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sabra Health with a short position of NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabra Health and NorAm Drilling.
Diversification Opportunities for Sabra Health and NorAm Drilling
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sabra and NorAm is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sabra Health Care and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS and Sabra Health is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sabra Health Care are associated (or correlated) with NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Sabra Health i.e., Sabra Health and NorAm Drilling go up and down completely randomly.
Pair Corralation between Sabra Health and NorAm Drilling
Assuming the 90 days horizon Sabra Health Care is expected to under-perform the NorAm Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Sabra Health Care is 2.0 times less risky than NorAm Drilling. The stock trades about -0.17 of its potential returns per unit of risk. The NorAm Drilling AS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 293.00 in NorAm Drilling AS on October 7, 2024 and sell it today you would lose (3.00) from holding NorAm Drilling AS or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sabra Health Care vs. NorAm Drilling AS
Performance |
| Timeline |
| Sabra Health Care |
| NorAm Drilling AS |
Sabra Health and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sabra Health and NorAm Drilling
The main advantage of trading using opposite Sabra Health and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabra Health position performs unexpectedly, NorAm Drilling can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| Sabra Health vs. Broadcom | Sabra Health vs. GOLD ROAD RES | Sabra Health vs. MidCap Financial Investment | Sabra Health vs. WisdomTree Investments |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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